Advice wanted 30k unsecured debt

enthusiasticsaver

All you can do really then is to continue with the budgeting. Stop taking out further credit cards or loans unless you can get any of your loan on to a 0% deal but unlikely for that high amount and 7.1% is not a bad unsecured rate. I would put £50 in an emergency savings account each month and stop using cards and or overdrafts. The other £150 I would focus on the credit cards initially then the loan. As it is on 0% and your credit rating is good then at least you have the option of moving it in April and December if not paid off by then so all is not lost now that you have realised you have a problem.

MyLastFiver

Hi mate, firstly, I think you're done totally the right thing, recognising the need to get your debts paid down BEFORE you default on payments.

On the subject of 0% credit, try Virgin. I've just got one of their cards with a 3 year money transfer offer. It enabled me to transfer 8 grand to my current account to pay off my car loan, thus saving about £100 in interest every month.

Now I don't think you're going to like this, but:

Car pcp finishes in sept 2017 but will need a similar arrangement

Dude you don't "need" a brand new car! Furthermore, right now you can't afford one. Given everything you've said in this thread, to lock yourself into another PCP contract on a brand new vehicle would be financial suicide.

People are daft about cars. You can get a perfectly reliable car for a few grand. Please don't say you're committed to getting out of debt, then buy a brand new car!

Anyway good luck.

dktreesea

With your car, are you talking about just needing an arrangement again so you can cover the balloon payment? Depending on where you are at when you get to this stage, if you can sort out a zero % credit card around that time with the first three months of purchases included, it may work out better to fund the balloon payment directly. Car finance can be expensive, and it isn't too flexible if you want to increase or decrease your payments during the term.

dktreesea

Also, minimum payments. If all you ever pay on your cards is the minimum payment your current card provider will love you - more interest for them eventually - but it will hinder you getting another card. I suggest at least, at some point during the month, putting an extra £30 on each of the cards. It doesn't sound much but it adds up and signals to the card providers that you are not struggling financially to make the payment.


In the past we haven't done that and have been rate jacked. A horrible experience. Fortunately we were able to make alternative arrangements pretty quickly, but one bank, in all kinds of financial trouble at the moment, jacked us from 13.9% to 29.9% in the space of six months. I've kept some accounts with them because they are now free, but I've never trusted them enough to borrow from them again.

MyLastFiver

dktreesea wrote: »

it may work out better to fund the balloon payment directly.

Or hand the car back and buy a runabout, rather than get himself into a load more debt.

Kimba1234

Thanks for sharing this! Very helpful

lessonlearned

Heres what I'd do......and it's exactly what I have done in the past to get out of trouble).

1. Have a moratorium on all discretionary spending for at least 3 months - tbe longer the better. That means buying nothing other than bare essentials, ie bills that haveto be paid, fuel for the cars (although cutting down on car usage) and food.

2. Have a serious Declutter and get selling to raise cash.

3. Reduce food bills by having a use up month, same with toiletries, grooming and cleaning products, use up the stashes.

All the money saved and raised then gets channelled into an emergency fund.

Whilst you are doing that you the work you way through the SOA with a fine tooth combe, cutting back and constantly reducing expenditure as you go.

You will surprise yourself because as you get more experienced you will find new ways of making economies and even making extra income. It's all about practice.

Here are a few obvious cuts you can make right now.

1. No clothes - wear what you already have. I bet you have enough in your wardrobe to keep you clothed and shod for at least a year

2. GYm membership. ditch it, it's a luxury you can't afford. Exercise can be free. Or you can buy some second hand equipment and create your own mini gym at home. .

3. Car leases. You can't afford them. You have a year to save up and buy one for cash. Do you both really need a car each.

4. Holiday. Can you cancel. Yes you will lose your deposit, it's over a year away so you should be able to get out of it. You can't really afford it.

5. Yes, You should pay more that the min amount on credit cards, even if they are 0 per cent. MIn payments are a red flag on your credit score. Even £10 extra on each one can make a difference.

dk250

Thanks for all the help and advice that's why I posted. I suppose im fortunate that in still able to control what i can do to sort it all out - I've read all the people who can't even make the minimum payments etc .

Tak this weekend is to clear through the House and garage and see what can go on eBay /Gumtree and see what i can negotiate with sky and Vodafone

I never knew that making minimum payments affected your credit score ? I Just assumed as long as you met the minimum woudl be fine

Car wise - if I hand back now I ll have £2k more debt , next sept I can hand it back penalty free and get something cheaper - I still won't have enough to buy one out right but could get something more affordable in current circumstances.


Gym I want to keep - that's my hobbie and enjoyment and stops me spending the equivalent if not more in the pub over a weekend .

Have cut up all my cards and set up £50 a month into a savings account for emergencys. Hopefully I can move the balances onto new cards when current offers end.

lessonlearned

Sounds like you've made a cracking start. Good luck.

MyLastFiver

dk250 wrote: »

Gym I want to keep - that's my hobbie and enjoyment and stops me spending the equivalent if not more in the pub over a weekend .

Yeah - I think this is all good. Gym membership is a good value leisure spend if you go several times per week. People who don't lift don't understand, brah

I never knew that making minimum payments affected your credit score ? I Just assumed as long as you met the minimum woudl be fine

I don't think it's as straightforward as some posters on here have written. Payment amounts are not reported to CRAs; just that the payment was made on time and met the terms of the credit agreement. However only making small payments may have a knock on to other factors on your credit report such as credit utilization ratio (carrying a high balance in relation to your credit limit). This is straight from the horse's mouth (Experian - my bold) Happy to be corrected if evidence can be produced, but "big red flag" is overstating it I think.

Experian wrote:

As long as you’re paying on time, paying only the minimum still counts as paying your credit card as agreed. Your payment history measures how often you pay your bills on time, and it’s a major component of your credit score.

When a credit card company reports to the credit bureaus each month, it simply indicates whether you’ve paid as agreed or if you’ve fallen behind. Technically, if you’re making the minimum payment on your credit card, you’re meeting your contractual obligations, which is good news for your credit score. However, paying the minimum can have an adverse effect on your credit.

Credit Usage
When you only make the minimum payment on your credit cards, you’re not doing much to lower your credit card debt. Another major component of your credit score is your credit utilization ratio, which measures how much of your available credit you’re using. Carrying a balance that’s more than 30 percent of your credit limit may harm your score.

For example, if you have a $2000 credit limit, it may be helpful to keep your balance under $600. If you owe more than $600 but only make the minimum payment, chances are there’s not too much left over after interest payments to make a substantial dent in your debt.

Additional Interest Accrued on Unpaid Balances
Your credit score doesn’t penalize you for paying more in interest; however, when you only pay the minimum, funds paid in additional interest could be going toward lowering your balance. For example, at a 15% interest rate, carrying a $2,000 balance for a year costs you $300 in interest alone. While your credit score doesn’t take a hit for the interest paid on a balance, your score could improve if the $300 in interest fees were used to pay down your balance, subsequently improving your credit utilization ratio.

Anyway you've made a great start - consider stating a Debt Free Diary (it's a supportive community on that board) and good luck